In April 2021, KIPP Public Schools Northern California (NorCal) closed its second loan with Equitable Facilities Fund (EFF). NorCal will use the proceeds to acquire an existing building to house a recently opened school, KIPP Esperanza High School (offering only grade 9 this year) in East Palo Alto, a facility which NorCal currently rents a portion of from Aspire Public Schools.
The high school property includes three buildings, two classroom facilities that were completed in 2011, and a gymnasium facility that was added in 2017. Total size is 40,386 square feet on 2.67 acres at 1039 Garden Avenue in the City of East Palo Alto. The purchase price was about $20 million, of which about $13 million of loan proceeds were combined with just under $7 million of equity from NorCal. Aspire currently operates a middle school housing grades 6-8 in the facility. Aspire will finish out the current school year and then move those students to a nearby Aspire facility.
Today, NorCal operates 15 schools that educate more than 6,500 students. Of these schools, one is an elementary school, six are middle schools, three are TK-8, and five are high schools—all in Northern California. Five additional schools are expected to open in Stockton, including a middle school scheduled to open in Fall 2021 with subsequent openings, one each year, until the fifth school is open in 2025. The legal borrower, KIPP Bay Real Estate (KBARE), is the real estate affiliate of NorCal.
The loan was issued through the California School Finance Authority and will utilize the intercept available through CSFA. It is the second obligation issued under a Master Trust Indenture for KBARE, both of which were funded with loans from EFF. The loan carries a 30-year final maturity, and a 4% coupon with a YTC of 2.70%.
Buck Financial Advisors served as financial advisor to NorCal. Akin Gump Strauss Hauer & Feld LLP served as borrower’s counsel to NorCal and KBARE. Orrick Herrington & Sutcliffe, LLC served as counsel to EFF. Congratulations to the students and families of NorCal and Esperanza High School.